Semi-Retirement Made Earlier and Easier

Why Early Retirement Is Not Possible For Most

In theory, it really isn’t that complicated to achieve an early retirement.

For this post’s sake, let’s agree that early is defined as below 45 years of age. This is reasonable and also considered pretty early for most, considering official retirement age in Singapore is currently 65. And by retirement, what I mean is that one is no longer obliged to work for a living.

Here are the three steps involved:

1. Save 50%* of your total income (inclusive of bonuses)

2. Invest in a basket of dividend stocks that returns 7-8% (3% to cover inflation and 4%-5% returned as dividends)

3. Continue doing this for about 17* years

Then voila! If that individual continues to live on the same amount of expenses, he would no longer have to work at a job he despises just to bring home the bacon. Isn’t the steps above simple? But the problem is that simple does not mean that it is easy. Here are some reasons why I think most Singaporeans will not retire early.

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“One more year” syndrome

For some, the retirement years should be closer to the utopia of an endless vacation rather than the life they had while working. Such retirements are not called golden for nothing. They are especially costly.

So one is tempted to postpone it by working for another year, and then another. There’s nothing inherently wrong with that, since it’s just a trade-off. But no one can guarantee that you will still be alive or energetic enough to enjoy that “more luxurious” retirement after that one more year.

And then there are others who would simply not contemplate retirement until they have achieved a 5-figure monthly passive income. Using the same example, that would amount to a need to accumulate $3 million in retirement assets and the household would need to earn an average of $20,000 a month over that 17 years if we maintain the 50% savings rate. Realistically, only the top quintile of income earners would come close to this income.

Believe that investing is like gambling

Most people still treat the stock market like a casino. The successes of market timing or catching the next growth stock dominates the lunchtime chat of white collar workers (that is if they are not talking about the latest celebrity divorce or lives of characters from the latest serial dramas). They are enamoured by the fact that their friend managed to purchase Blumont shares at 11 cents on 17 Oct and then sold them at 24 cents just four days later. Achieving >100% return over the weekend! (I would bet that the friend didn’t tell you he bought some of the same shares one month before too.)

Nobody likes hearing about the slow, boring returns of local telcos or REITs. (What?! It’s not even 10 or 12%???!!!!) Because of this mindset, they would never be keen to save 50% of their salary to build a more conservative portfolio that is expected to return an average of <10% a year.

Not willing to reduce expenditure

It doesn’t matter if the person is earning $3,000, $10,000 or even $30,000 a month. Most people find it hard to save 50% of their income (actually if you save most of your bonuses, the ratio could be lower than 40% of the month paycheck). And that is even if they are earning a few times of what their parents had done. If we rightfully exclude “savings” used for money bombs (this and that), it becomes even more difficult.

Instead, most would use their 10% of the income saved to punt either 4-D/TOTO or penny stocks, hoping to make a quick and big gain. And as we all know, the odds for these “investments” (more like lotteries) are less than favourable.

Low wages

There’s actually a significant segment of the population that earns below $25,000 a year. Although saving 50% of their income is not impossible, it would require much more effort. The lower the income, the higher the amount of effort required. (Have to admit even I would struggle to save anything if I earn <$10,000 a year) But the fact remains that most of them are either unable/unwilling to increase their income or unable/unwilling to learn to put in that extra effort.

Early retirement is not enticing enough

For some, the option of early retirement is just not worth the above “sacrifices”. Perhaps they don’t really detest their jobs (or simply won’t admit to it) as much as me, or they do not know what to do with the additional time at hand if they didn’t had to work.

My wife actually belongs to the latter camp and she actually found it depressing to “have nothing to do” in her teenage years (too bad for her that I hadn’t started dating her). She worked during all her summer holidays after a one to two weeks break. Therefore, it’s also not surprising that she doesn’t feel the same urgency as I have to save even more than what we currently do.

But luckily for me, she is generally happy with our current lifestyle and is already starting to feel that most aspects of lifestyle upgrades are just inefficient and a waste of both our money as well as natural resources.

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*If 50% is too much (maybe you should just give it a try), or you think 17 years is too long (way to go, bro!), you can refer to this post from Mr Money Mustache to re-calibrate the targets.

26 thoughts on “Why Early Retirement Is Not Possible For Most”

To add on, retirement does not mean not doing anything. Instead, it’s having the option to choose the work that you like to do and not forced to stick to your unsatisfying job just because it pays well and you need the money. I’m sure many young people will like to have that kind of financial freedom, but they do not have the courage to do it. It could be due to insufficient planning, the lack of knowledge to plan ahead or just simply the lack of confidence.

I guess I’m lucky to have a husband like Mr 15HWW who has the passion and tools (garnered from the many books and blogs he read) to plan for our finances so that I can sleep without a worry at night.

Your husband is lucky to have a wife like you too. I’m sure he will agree. :p

I do hope i can plan my finances with my future wife too. It’s great to be able to sit down as a couple and set common financial goals. Achieving things together makes the journey even more worthwhile.

Frankly speaking, Mr 15HWW is very comfortable with his material stuff and lifestyle. He finds G2000 shirts comfortable, happy with his black waterproof bag from Taiwan night market and contented with his 2.5years old iPhone 4. There’s nothing that he NEEDS to buy, anything more will be WANTS.

I’m not complaining, in fact I’m glad that leaves me with more budget for some shopping 😛

Well, I always say that if you’ve never tried something new, you don’t have enough information to know your needs and wants yet 😉 Only when you’ve experienced the high and the low, then you decide whether your choice is the choice of no regrets 🙂

Let the one who is better at financial discipline control the needs and let the one who is the visionary of life experiences be the one to control the wants. He needs your ‘help’ as much as you need his, he just don’t know it yet 😉

I think when I mean retire, it’s not so much about taking vacations and doing nothing that adds value to society.

For example, after I retire from a conventional career, I will be able to have a leisurely swim and breakfast everyday in the morning and then do some part-time “work” in the afternoon (might be unpaid).

To me, having reach retirement stage (where I can choose not to work anymore) does not mean I do not continue to work. When we reach financial freedom, most choose to continue to work but they work something that they enjoy doing.

I have seen too many of my older colleagues worry about money. If they stop working now they can barely survive. This adds up to stress in thier lives. That’s why I want to plan early and reach financial freedom early.

On the stock market, investing is indeed boring. Especially now when the market has been flat for so long =.=

Excitement on penny shares? I’ve lost that feeling of excitement and fear in the stock market after being in it for a few years. I guess this is a good thing.

I concur. There’s a good chance that what we enjoy might not earn us anything or at the very least, does not pay as well.

I think most people work too much, sitting down at their cubicles for 8 hours a day staring at the computer screen. This sedentary lifestyle (plus the added stress from overspending) is also likely to shorten our time in this beautiful world.

For the markets, I am still excited when there’s a correction. It’s an opportunity to invest and increase dividend income. =)

i think the spirit of this post is that if you can’t do 50%, surely you can do 25%? If not, how about 12.5? or 6.25%?

The key point is to start doing something now instead of delaying. If your salary of $3k is too low to save, and if you REALLY want to retire early, you just need another source of income. There’s no other way to do it without the sacrifices that comes along with it.

Of course, if you don’t want to be so hard on yourself, then maybe you don’t really want to retire early. it’s your decision after all, and there’s no need to follow others. Retiring early, 100k before 30, FF, passive income seems to be so fashionable these days, lol

I have many friends telling me the cost of raising a child would render early retirement impossible. Since I am not at that stage, quite unfair for me to comment. But sometimes I do wonder why it’s so expensive nowadays. Is it really the cost or it’s the expectations of the parents?

I would say it is the expectation of the parents that make cost of raising children such a challenge, creating false sense of high expenditures. Over these years, my wife and I who are just another ordinary middle income couple still manage to save & grow our wealth while raising our two schooling kids. And without having big ticket items like car.

I feel that achieving 4-5% of dividends isn’t impossible although it would likely restrict one to certain sectors. A more complicated method would be a 4% withdrawal rate and that might require selling some shares from time to time.

And indeed, a big assumption here is the 50% of income saved are all used to invest, which might be too unrealistic or risky for most. Maybe we can set aside the 1st year of savings as emergency funds? That would then lengthen the time to 18 years, which isn’t too bad too.